Taming Bad Financial Instincts

For years, whenever I tried to save money, it seemed to melt like snow in my hot, spendy little hands.

Then I discovered the miracle of behavioral economics: the study of why we do crazy things with money—and how to stop.

The first principle that I applied to my life immediately was the concept of hyperbolic discounting: When given the choice of two financial rewards, humans tend to pick the one they can spend instantly at Target.

Our prehistoric reflexes aren’t geared toward saving to buy, say, a bigger cave in five years. We tend to discount that future gain.

As Harvard economist David Laibson once told me: the best way to get yourself to save money is to tie your own hands. Transfer the money automatically, to an account where you can't get your mitts on it. So I did.

I set up automatic transfers to an account that wasn’t linked to my checking—and it did not have an ATM card—I saved tens of thousands over the years.

So imagine my horror when the bank recently offered to attach a deadly debit card to my savings account (promising no fees and all that bunk).

“You must be kidding!” I yelped. “If you give me a debit card, I’ll spend that money! No way!”

Fortunately, the customer service rep laughed. And my money is safe from my own worst impulses. Phew.

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